Australia Expands at Fastest Pace Since 2007 on Exports: Economy

Customers use their mobile phones while dining at an outdoor restaurant at Bondi Beach in Sydney. The economy expanded 3.1 percent in the fourth quarter from a year earlier, today’s report showed. Photographer: Ian Waldie/Bloomberg

March 6 (Bloomberg) -- Australia’s economy expanded in 2012
at the fastest pace in five years as resource investment and
exports outweighed subdued manufacturing and construction.

Gross domestic product grew 3.6 percent last year, the best
performance since a 4.7 percent expansion in 2007, data from the
Australian Bureau of Statistics compiled by Bloomberg showed.
The economy grew 0.6 percent in the fourth quarter from the
previous three months, when it rose a revised 0.7 percent that
was higher than initially reported, today’s report showed.

Stocks and the currency rose as stronger exports validated
Reserve Bank of Australia Governor Glenn Stevens’s decision to
leave interest rates unchanged yesterday as the nation extends
21 recession-free years. Policy makers cut rates by 1.75
percentage points in the 14 months through December to rebalance
an economy where mining regions in the north and west thrive
while builders and manufacturers in the south and east struggle,
dragged by the strength of the nation’s currency.

“The broad picture is one of an economy in better shape
than many commentators give credit,” said Michael Blythe, chief
economist in Sydney at Commonwealth Bank of Australia, the
nation’s biggest lender. “Despite all the economic dramas and
general pessimism, the growth outcome actually beat the
consensus forecast.”

The nation’s benchmark S&P/ASX 200 Index climbed 1 percent
today and the local dollar traded at $1.0293 at 2:10 p.m. in
Sydney from $1.0264 before the release, extending its longest
stretch above parity with the U.S. dollar. The three-year
government bond yield held gains, rising 8 basis points to 2.85
percent.

The result wasn’t as good as it appears because the
purchase of the second-hand asset that boosted public
consumption is “not actually adding to new economic growth,
it’s just a transfer,” said Joshua Williamson, a senior
economist at Citigroup Inc. in Sydney.

“The headline GDP met expectations, but the details of the
report showed little of the rebalancing the RBA wants towards
domestic demand that remains below trend,” he said. “The
increase in government consumption is basically equal to the
decrease in dollar terms of private non-dwelling construction.”

Construction Slump

The nation’s household savings ratio declined to 10.1
percent in the three months through December from 10.3 percent
in the third quarter, today’s report showed.

The RBA cut its benchmark rate to 3 percent in December,
matching the half-century low set during the 2009 global
recession as the labor market softens and an elevated currency
hurts industries such as manufacturing and tourism. It predicts
the nation’s mining investment boom will peak this year.

Reflecting the strength of the resource industry, final
demand in the mining hub of Western Australia grew 14.2 percent
in the fourth quarter from a year earlier, and the Northern
Territory soared 32.8 percent, today’s report showed. In
contrast, the manufacturing center of Victoria shrank 0.1
percent and the island state of Tasmania contracted 4.6 percent.

Productivity Pickup

Productivity, which the central bank and Treasury say needs
to lift to maintain rising living standards, grew 1 percent in
the market sector in the fourth quarter from the prior three
months, when it advanced 0.4 percent, the report showed.

The nation’s terms of trade -- a measure of windfall gains
from exports that reached a record high in 2011 -- declined 2.7
percent in the final quarter of 2012 from the prior three
months, and were 12.9 percent lower than a year earlier.

Traders are pricing in a 24 percent chance the RBA will
lower rates next month, swaps data compiled by Bloomberg show.

In the past month, the government reported that
unemployment held at 5.4 percent in January as employers added
part-time jobs, while a private survey showed consumer
confidence surged last month by the most since September 2011.

Australia’s 3.6 percent growth last year led Norway’s 3.2
percent, the strongest expansions among major advanced
economies, according to data compiled by Bloomberg.

‘Solid Growth’

In the euro area, data today may confirm an initial report
that GDP contracted 0.6 percent in the fourth quarter from the
previous three months, according to the median estimate of
economists surveyed by Bloomberg News. The U.S. will give
mortgage-application numbers and the Bank of Canada is forecast
to leave its benchmark rate unchanged at 1 percent.

“Australia has managed to achieve solid growth in the
December quarter at a time when around half of all advanced
economies contracted, including five major advanced economies,”
Treasurer Wayne Swan said in a statement after today’s release.
“Australia’s around-trend growth rate over the year is more
than four times the OECD average.”